86R9499 TSR-F
	By: King of Hemphill	H.B. No. 4519

	A BILL TO BE ENTITLED
	AN ACT
	relating to the development of a central filing system by the
	secretary of state for the filing of financing statements for
	certain security interests; authorizing fees; providing civil
	penalties.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
	SECTION 1.  Section 9.302, Business & Commerce Code, is
	amended to read as follows:
	Sec. 9.302.  LAW GOVERNING PERFECTION AND PRIORITY OF
	AGRICULTURAL LIENS. (a) Subject to Chapter 607, while [While] farm
	products are located in a jurisdiction, the local law of that
	jurisdiction governs perfection, the effect of perfection or
	nonperfection, and the priority of an agricultural lien on the farm
	products.
	(b)  Notwithstanding any law to the contrary, to the extent
	of any conflict between this chapter and Chapter 607, Chapter 607
	controls.
	SECTION 2.  Section 9.501, Business & Commerce Code, is
	amended by amending Subsection (a) and adding Subsection (c) to
	read as follows:
	(a)  Except as otherwise provided in Subsection (b) or (c),
	if the local law of this state governs perfection of a security
	interest [or agricultural lien], the office in which to file a
	financing statement to perfect the security interest [or
	agricultural lien] is:
	(1)  the office designated for the filing or recording
	of a record of a mortgage on the related real property, if:
	(A)  the collateral is as-extracted collateral or
	timber to be cut; or
	(B)  the financing statement is filed as a fixture
	filing and the collateral is goods that are or are to become
	fixtures; or
	(2)  the office of the Secretary of State, in all other
	cases, including a case in which the collateral is goods that are or
	are to become fixtures and the financing statement is not filed as a
	fixture filing.
	(c)  Notwithstanding any other law to the contrary, the
	office in which to file a financing statement to perfect an
	agricultural lien is the office of the Secretary of State as
	provided by Chapter 607.
	SECTION 3.  Title 12, Business & Commerce Code, is amended by
	adding Chapter 607 to read as follows:
	CHAPTER 607. CENTRAL FILING SYSTEM AND NOTICE REQUIREMENTS FOR
	FARM PRODUCTS
	Sec. 607.001.  DEFINITIONS. In this chapter:
	(1)  "Buyer" means a person who, in the ordinary course
	of business, buys farm products from another person who is engaged
	in farming operations and who is in the business of selling farm
	products.
	(2)  "Central filing system" means a statewide system
	that is developed by the secretary of state and certified by the
	secretary of the United States Department of Agriculture to be used
	for the filing of an effective financing statement.
	(3)  "Commission merchant" means a person engaged in
	the business of receiving a farm product for the purpose of selling
	the farm product on commission or on behalf of another person.
	(4)  "Debtor"  has the meaning assigned by Section
	9.102.
	(5)  "Effective financing statement" means a financing
	statement, as defined by Section 9.102, that covers a farm product
	and that is filed in compliance with this chapter.
	(6)  "Farm products" has the meaning assigned by
	Section 9.102.
	(7)  "Selling agent" means a person, other than a
	commission merchant, who is engaged in the business of negotiating
	the sale or purchase of a farm product on behalf of a person engaged
	in farming operations.
	(8)  "Writing" or "written" means information that is
	inscribed on a tangible medium or that is stored in an electronic or
	other medium and is retrievable in perceivable form.
	Sec. 607.002.  RULES. The secretary of state shall adopt
	rules as necessary to implement this chapter.
	Sec. 607.003.  FORMS; NOTICE. (a)  The secretary of state
	shall develop and maintain standard forms for an effective
	financing statement, a statement of continuation, a statement of
	partial release, a statement of amendment, a statement of
	assignment, and a statement of termination that are consistent with
	this chapter.
	(b)  Except as otherwise provided by this chapter, receipt of
	a written notice required by this chapter is presumed if the notice
	is sent by first class mail, postage prepaid.
	Sec. 607.004.  EFFECTIVE FINANCING STATEMENT. (a) An
	effective financing statement must:
	(1)  be signed by the secured party and filed by the
	secured party with the office of the secretary of state in the
	central filing system under Section 607.007;
	(2)  be signed by the debtor; and
	(3)  provide the following information:
	(A)  the name and address of the secured party;
	(B)  the name and address of the debtor;
	(C)  one of the following:
	(i)  the social security number of the
	debtor;
	(ii)  if the debtor is not an individual, the
	taxpayer identification number of the debtor; or
	(iii)  another unique identifier
	established by rule of the secretary of state;
	(D)  the farm product covered by the effective
	financing statement;
	(E)  each county in this state where the farm
	product is produced or will be produced, or a blanket code
	established by the secretary of state that covers all counties in
	this state;
	(F)  a description of the farm product that is
	subject to a security interest only if a description is needed to
	distinguish that farm product from other farm products owned by the
	same person but not subject to the security interest; and
	(G)  the crop year, unless for the duration of the
	effective financing statement every crop of the farm product that
	is subject to the security interest is to be subject to the
	interest.
	(b)  A secured party may use one effective financing
	statement to reflect multiple farm products or farm products in
	multiple counties.
	(c)  An effective financing statement must be amended to
	reflect material changes. An amendment to an effective financing
	statement must be:
	(1)  in writing;
	(2)  signed by the secured party and the debtor; and
	(3)  filed not later than the 90th day after the
	original filing date.
	(d)  An effective financing statement remains in effect for a
	period of five years from the date of filing and may be extended for
	an additional five-year period by filing or refiling a statement of
	continuation at least 180 days before the expiration date of the
	initial effective period.
	(e)  The secretary of state shall remove an effective
	financing statement from the central filing system when the
	statement expires or when a statement of termination is received
	from a secured party, whichever occurs first.
	(f)  The secretary of state may collect a fee for each
	effective financing statement filed under this chapter. An
	effective financing statement is not filed until the fee authorized
	by this section is paid as provided by Section 607.007(l).
	(g)  An effective financing statement is considered
	satisfactory if it substantially complies with the requirements of
	this section even if the statement contains minor errors that are
	not seriously misleading as determined by the secretary of state.
	Sec. 607.005.  PROTECTION OF BUYERS, COMMISSION MERCHANTS,
	AND SELLING AGENTS. A buyer, a commission merchant, or a selling
	agent who, in the ordinary course of business, purchases a farm
	product from a person engaged in farming operations takes the farm
	product subject to a security interest in the farm product if:
	(1)  either:
	(A)  the buyer, commission merchant, or selling
	agent fails to register with the secretary of state as prescribed by
	rule before purchasing the farm product and the secured party has
	filed an effective financing statement in the central filing system
	that covers the farm product being purchased; or
	(B)  the buyer, commission merchant, or selling
	agent:
	(i)  receives from the secretary of state
	written notice under Section 607.007(e) or (i); and
	(ii)  does not secure, by performing any
	payment obligation or other method, a waiver or release from the
	secured party of the security interest specified in an effective
	financing statement; or
	(2)  the secured party or the seller of the farm product
	provides written notice of the security interest to the buyer,
	commission merchant, or selling agent.
	Sec. 607.006.  IMMUNITY FROM LIABILITY. A buyer, commission
	merchant, or selling agent who, in the ordinary course of business,
	purchases farm products from or sells farm products for a person
	engaged in farming operations may not be liable for errors or
	inaccuracies generated by the central filing system if the buyer,
	commission merchant, or selling agent has otherwise complied with
	this chapter.
	Sec. 607.007.  CENTRAL FILING SYSTEM. (a)  The secretary of
	state shall develop and implement a central filing system, and
	shall obtain the necessary certification for the system from the
	United States Department of Agriculture.
	(b)  The secretary of state may adopt rules for the
	implementation and operation of the central filing system.
	(c)  The Department of Information Resources shall assist
	the secretary of state in developing and implementing the central
	filing system.
	(d)  The secretary of state shall use the central filing
	system to:
	(1)  record the date and hour of the filing of each
	effective financing statement;
	(2)  compile all effective financing statements into a
	master list that:
	(A)  is organized by farm product;
	(B)  is arranged within each farm product:
	(i)  as appropriate:
	(a)  in alphabetical order by last name
	of the debtor or, if the debtor is not an individual, the first word
	in the name of the debtor;
	(b)  in numerical order by social
	security number of the debtor or, if the debtor is not an
	individual, the tax identification number of the debtor; or
	(c)  according to a unique identifier
	established by rule of the secretary of state;
	(ii)  geographically by county in which the
	farm product was produced; and
	(iii)  by crop year;
	(C)  includes the information described by
	Section 607.004(a)(3);
	(D)  is available in part in print or electronic
	format; and
	(E)  can be organized by other additional sorting
	methods; and
	(3)  maintain records of all buyers of farm products,
	commission merchants, selling agents, and others who register with
	the secretary of state, using a form that requires:
	(A)  the name and address of each registrant;
	(B)  information on the farm product or products
	that the registrant is requesting;
	(C)  the name of each county in this state where
	the farm product is produced or will be produced, or a blanket code
	indicating the product is produced or will be produced in all
	counties of this state; and
	(D)  an authorized signature.
	(e)  On or before the last business day of each month, the
	secretary of state shall provide to a registrant a copy of those
	portions of the master list that include information requested by
	the registrant.  The copy shall be presumed to have been received by
	the third business day of the following month.
	(f)  A registrant is considered registered only for those
	portions of the master list for which the registrant registers.
	(g)  A registrant is subject only to security interests shown
	on the portions of the master list that the registrant receives as a
	consequence of registration with the secretary of state. If a
	particular security interest is shown on the master list but was
	included after the last regular distribution of portions of the
	master list to registrants, a registrant may not be subject to that
	security interest.
	(h)  The registration with the secretary of state of a buyer,
	commission merchant, selling agent, or other registrant expires one
	year after the effective date of the registration.
	(i)  On request, the secretary of state shall provide, not
	later than 24 hours after the time of the request, verbal
	confirmation of the existence or nonexistence of any effective
	financing statement on file. Not later than the close of the
	business day following the date on which the request was received,
	the secretary of state shall provide to a requestor written
	confirmation of the existence of an effective financing statement.
	(j)  The state or a political subdivision of the state is not
	liable if a loss or claim results from a confirmation of the
	existence or nonexistence of an effective financing statement on
	file with the secretary of state made in good faith by an employee
	of the secretary of state under this section.
	(k)  A filing with the secretary of state under this section
	is in addition to other filing requirements under this chapter.
	(l)  An effective financing statement is not considered
	filed under this section until all authorized fees are paid to the
	secretary of state.
	(m)  The secured party shall file a termination statement not
	later than the 20th day after the date there are no outstanding
	secured obligations or commitments to make advances, incur
	obligations, or otherwise give value. The secured party may not be
	required to file a termination statement if the debtor makes a
	written request addressed to the secured party that a termination
	not be filed. The request must be signed by the debtor or an
	authorized representative of the debtor and may be made at any time
	before the expiration date of the effective financing statement.
	If the affected secured party does not file a termination statement
	as required by this subsection, the secured party is liable to this
	state for a civil penalty of $500 and to the debtor for any loss
	caused to the debtor by the secured party's failure to terminate the
	effective financing statement.
	(n)  The attorney general may enforce Subsection (m) on
	behalf of the secretary of state and may take appropriate actions to
	collect any penalties owed under Subsection (m).
	Sec. 607.008.  WRITTEN NOTICE AFFECTING FARM PRODUCTS;
	DISCLOSURE REQUIREMENTS; PENALTY. (a)  A secured party or a seller
	of farm products may provide to a buyer, a commission merchant, or a
	selling agent, not earlier than one year before the sale of the farm
	products, a written notice of a security interest organized
	according to farm products that:
	(1)  is an original or reproduced copy thereof;
	(2)  includes:
	(A)  the name and address of the secured party;
	(B)  the name and address of the debtor;
	(C)  one of the following:
	(i)  the social security number of the
	debtor;
	(ii)  if the debtor is not an individual, the
	taxpayer identification number of the debtor; or
	(iii)  another unique identifier
	established by rule of the secretary of state; and
	(D)  a description of the farm product that is
	subject to the security interest created by the debtor, including
	the amount of the product where applicable, crop year, county, and a
	reasonable description of the property; and
	(3)  states any payment obligations imposed on the
	buyer, commission merchant, or selling agent by the secured party
	as conditions for waiver or release of the security interest.
	(b)  A written notice under Subsection (a) must be amended to
	reflect material changes. An amendment to a written notice must be:
	(1)  in writing;
	(2)  signed; and
	(3)  provided not later than the 10th day after the
	original notice date.
	(c)  A written notice remains in effect until the earlier of
	the expiration period of the effective filing statement or the date
	of a transmission of notice signed by the secured party that the
	effective filing statement has lapsed.
	(d)  For purposes of this section, "receipt" of a written
	notice to a buyer, a commission merchant, or a selling agent occurs
	within a reasonable time after the secured party or the seller of
	the farm product sends the notice if the notice is sent in a manner
	consistent with Section 1.201(b)(36).  If a written notice is
	transmitted electronically, the notice is presumed to be received
	immediately on transmission. If the written notice is deposited in
	the mail, the notice is presumed to be received on the third
	business day after the date on which the notice was deposited.
	(e)  A secured party who intends to provide written notice of
	the existence of a security interest in a farm product as provided
	by this section shall require the person engaged in farming
	operations to execute a security agreement that includes a
	provision requiring the person to provide to the secured party a
	list of the buyers, commission merchants, and selling agents to or
	through whom the person may sell the farm product. If the person
	engaged in farming operations sells the farm product collateral to
	a buyer or through a commission merchant or selling agent not
	included on the list, the person engaged in farming operations is
	subject to Subsection (f), unless the person:
	(1)  has notified the secured party in writing of the
	identity of the buyer, commission merchant, or selling agent at
	least seven days before the date of the sale; or
	(2)  has accounted to the secured party for the
	proceeds of the sale not later than the 20th day after the date of
	the sale.
	(f)  A person who violates this section is liable to this
	state for a civil penalty in an amount that is the greater of:
	(1)  $5,000; or
	(2)  15 percent of the value or benefit received for the
	farm product described in the security agreement.
	SECTION 4.  As soon as practicable after the effective date
	of this Act, the office of the secretary of state shall adopt rules
	and forms necessary to implement Chapter 607, Business & Commerce
	Code, as added by this Act.
	SECTION 5.  This Act takes effect September 1, 2019.